Customers on fixed-rates could see mortgage repayments increase by up to £1,021 a year as banks change their fixed rate deals in readiness for further interest rate rises.

According to online mortgage company mform.co.uk, fixed rate mortgages worth over £100 billion could be coming to an end this year, and it warns that many of the homeowners with these deals are going to see a huge increase in their mortgage repayments. It estimates that they will see their mortgage repayments increase by around £1,021 a year, if they move on to their lender’s standard variable rate (SVR).

In 2005, around 1.3 million fixed rate mortgages had been taken out on top of the 977,000 in 2004. The majority of these would have been for two and three year fixes with the market average rates for this type of mortgage being 5.18% in 2005 and 5.30% in 2004. (Read more: Mortgage Moves).

The average in February 2007 had increased to 5.34% and the average SVR was 6.12%, mform.co.uk says that with further rises being predicted in the Bank of England base rate, the average fixed rate and SVR are set to increase dramatically.

“Some lenders have pulled some or all of their fixed rate deals or placed them on ‘withdrawal watch’, which means that they could be pulled at any moment,” says Francis Ghiloni, mform.co.uk Marketing and Business Development Director.

“Customers whose deals are running out should research the market now because there will be fewer offers available when their deal expires.”

Three Bank of England rate rises have been pushed through since August 2006 taking the base rate from 4.5 per cent to 5.25 per cent and adding around £750 to the annual cost of an average £100,000 variable rate mortgage.

While a sharp rise in interest rates of 0.5% cannot be ruled out when the Bank of England hold their monthly meeting next week, economists predict that inflation is likely to fall away from its current high in the latter half of 2007. Martin Weale, Director of the National Institute Economic Review (NIER) believes that interest rates will be at, or close to, their current level in twelve months time. (Read more: Bank Criticised Over Inflation).

If you are thinking about remortgaging, a long term fixed rate deal may not necessarily be the right option as you are effectively ensuring that you will not benefit from any cuts in interest rates, if they occur. Instead, a tracker mortgage, which moves inline with the Bank of England base rate may be more appropriate, or you could look at a short term fix such as a one year fixed rate.